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State Bd. of Funeral & Cemetery Serv. v. Settlers Life Ins. Co.

Court of Appeals of Indiana

March 14, 2014


APPEAL FROM THE MARION SUPERIOR COURT. The Honorable James B. Osborn, Judge. Cause No. 49D14-1212-PL-48790.

ATTORNEYS FOR APPELLANT: GREGORY F. ZOELLER, Attorney General of Indiana, FRANCES BARROW, Deputy Attorney General, Indianapolis, Indiana.


BAKER, Judge. NAJAM, J., and CRONE, J., concur.


Page 1171

BAKER, Judge

In this case, we consider whether the product sold by appellee-petitioner Settlers Life Insurance Company (Settlers), comprised of an insurance policy with an option to assign the policy to a trust that funds funeral and burial goods and services purchased after death, falls under the Pre-Need Act.[1] Here, appellant-respondent, the State Board of Funeral and Cemetery Service (the Board), appeals the trial court's grant of Settlers's motion for summary judgment in which it determined that Settlers's insurance product did not fall within the statutory confines of the Pre-Need Act. The Board argues that Settlers's product was intended to provide funding for the purchase of funeral services

Page 1172

or merchandise, which is the same purpose the products regulated by the Pre-Need Act were intended to fulfill; the Board contends that all lawful funeral trusts must comply with the Pre-Need Act. We find that Settler's product does not fall within the jurisdiction of the Pre-Need Act. Therefore, the judgment of the trial court is affirmed.


On June 18, 2009, Settlers sold Eva Hughes an insurance policy in the amount of $10,000, with benefits payable on proof of her death. Settlers's product has two parts. The first part is the insurance policy with a $10,000 benefit payable on proof of death; the second part is an optional trust. Those individuals who purchase Settlers's life insurance policy have the option to assign the policy irrevocably to a National Guardian Life Insurance Company (NGL) Trust. If the insured does not assign the policy, he or she retains a standard life insurance policy, which means that, upon the death of the named insured, the beneficiaries of the policy may spend the proceeds for any purpose. However, if the insured decides to assign the policy to the irrevocable NGL Trust, the insurance proceeds cannot be used to pay for anything other than funeral expenses, and the proceeds may only be spent on the funeral and burial goods and services, such as embalming, casket, and funeral services as listed in the Trust.

As Hughes could not afford to pay for funeral services and merchandise, she decided to assign her insurance policy to the Trust. Along with her insurance policy application, Hughes signed an Irrevocable Assignment of Ownership. The NGL Trust was created by Settlers's parent company, National Guardian Life; it is administered by Merrill Lynch and governed by Wisconsin law. Settlers has sold this product, or a similar one, in over thirty states. In 2011, it issued about 100 policies in Indiana, six of which were irrevocably assigned to the NGL Trust.

After buying the policy, Hughes applied for Medicaid benefits in Pulaski County. The County Department of Family Resources (DFR) told her that she was ineligible for benefits because her Settlers policy disqualified her. The DFR excludes eligible funeral trusts from consideration of assets when determining Medicaid eligibility, but only when a funeral trust meets certain requirements. Hughes's policy was not owned by a funeral home, which is a requirement, and so it was considered a $10,000 asset. Hughes was told that she would remain ineligible for Medicaid unless she transferred ownership of her policy to a funeral home. Accordingly, Hughes went to Frain Mortuary, where Jon Frain was employed as the funeral director, to effect a transfer. Frain contacted Settlers, who initially explained that the policy could not be transferred because Hughes did not have the right to do so, as she had chosen to assign the policy to an irrevocable trust.

The Pulaski County DFR determined that the assignment of the policy would not qualify as an excluded resource under Medicaid. Louise Taylor, a consultant in the Medicaid Eligibility Unit, provided a Policy Answer Line review determining whether the Trust was a valid funeral trust under Wisconsin law. Taylor wrote that " [u]nder Wisconsin law, a Life ...

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